San José, Costa Rica, since 1956

Controversy Brews over Liquor Factory’s Fate

Even though it reeks of booze inside the dimly lit National Liquor Factory (FANAL), no one within these walls is seeing double. To the contrary, Costa Rica’s struggling government-run liquor monopoly, perhaps best known for its star sugarcane liquor Cacique, is seeing just half the sales it saw five years ago.

As world-renowned liquor companies such as the popular scotch producer Johnnie Walker march their way through the Costa Rican market, leaving a trail of ads plastered upon bar walls and billboards, FANAL is gearing up for its first push in years to promote its products to Ticos.

Meanwhile, the fate of the 154-year-oldinstitution – at one time the largest source of income for the Costa Rican government – is caught up in a tug-of-war between opposite sides of Costa Rica’s political spectrum, who for nearly two decades have disagreed over whether or not the government should continue to run the factory, located in the coffee-producing region of Grecia, northwest of San José.

FANAL’s future is “as complicated as Cuba’s,” according to Francisco Oreamuno, president of the National Production Council (CNP), a government agency financed by the liquor factory’s profits and which Oreamuno is trying to modernize.

A stroll through the factory, originally founded to reduce deaths from crude alcohol consumption and finance Costa Rica’s war against U.S. mercenary filibusters, makes one wonder if FANAL is a thing of the past.

It’s been more than a dozen years since any investments have been made in the factory.

“We have a five-year plan to bring our technology up to date,” FANAL Manager Carlos Villalobos yelled over the clinks and growls of a 17-year-old bottle-cleaning machine at the Grecia factory.

The factory’s future is looking, well, blurry.

The factory’s marketing department is limited in its powers; the factory no longer distills alcohol as it once did, buying it instead from private sugarcane mills that have benefited from its demise; and its profits, instead of being reinvested in the company, are dedicated to other public institutions.

“If I asked for a new bottle design today, I would leave this administration in 2010 and not see a new bottle released,” Oreamuno recently told The Tico Times.

The Production Council, whose president himself calls it an arcane institution, has left FANAL with an empty bottle. The factory is required by law to hand over its profits to the council to finance small farmers, operate a wholesale food market for government agencies and invest in statistical agricultural industry research.

Last year, the newly arrived Arias administration touted plans to close down CNP and give the liquor factory more flexibility as part of sweeping reforms to the massive, fragmented bureaucracy that oversees the nation’s struggling agricultural sector.

“It’s fitting to ask: what are the benefits for the agricultural sector to maintain CNP? There’s no concrete answer,” Production Minister Alfredo Volio said in an agricultural policy publication last year.

CNP leader Oreamuno resembles a disappointed father who spares few kind words for his struggling institution.

“The world evolved and we didn’t,” he said. CNP is stuck in the middle of the 20th century, he added. Costa Rica’s agricultural sector hasn’t advanced since the late 1980s, he claims, when the U.S. Department of Agriculture invested in Costa Rica’s agricultural sector as part of the Caribbean Basin Initiative (CBI).

In anticipation of the possible passage of the Central American Free Trade Agreement with the United States (CAFTA), which would require a restructuring of the agricultural industry, Arias by decree created the position of Production Minister, expected to oversee the proposed Production Ministry (MIPRO). If the proposal is passed, the new ministry would combine the Agriculture and Livestock Ministry (MAG), the Ministry of Economy, Industry and Commerce (MEIC) and parts of several other agricultural sector institutions under one streamlined, umbrella organization.

Soon after he was appointed, Production Minister Volio announced plans to close CNP.

“CNP is a highly complex institution with a $2.8 million annual deficit despite the fact that 20% of FANAL’s sales are used to finance it, which limits (FANAL’s) capacity for reinvestment and has caused its growth to stagnate in recent years”Volio said.

But staunch opposition from FANAL and CNP union workers and opposition politicians has crippled reform attempts.

Detractors of the administration’s plans include Citizen Action Party (PAC) legislator Joaquín Salazar, who has accused Oreamuno and Volio of stepping outside their powers with their proposed reforms. This week, Volio resigned as Production Minister to lead the pro-CAFTA campaign as a referendum on the trade pact approaches (see separate story).

Antonieta Benambourg, a member of the board of directors of the Professional Workers Union of CNP and FANAL (SIPRO) said members want to negotiate with the administration to “strengthen the institution, not dismantle it.”

The administration has since toned down its rhetoric, and is talking about more moderate reforms to the CNP and FANAL.

Oreamuno said the two institutions’ combined 850 employees are what make it “politically impossible” to shut down the institutions altogether.

The CNP and the Planning Ministry (MIDEPLAN) have approved his plan to move unnecessary CNP workers to other institutions such as the Ministry of Environment and Energy (MINAE), and Oreamuno said he has already begun this task.

But even this is drawing fire.

“This issue has to go to the Legislative Assembly because it is practically tossing out the CNP law,” said union leader Benambourg, referring to the 1949 Law that created the Production Council. SIPRO and other critics have presented two lawsuits before the Constitutional Chamber of the Supreme Court (Sala IV) attempting to stop the restructuring.

Benambourg and legislator Salazar said FANAL should be allowed to again distill alcohol, a privilege the Public Health Ministry took away in 1998 after concluding that a wastewater treatment plant at the factory wasn’t up to standards. Additionally, if FANAL is given the capacity to produce ethanol, a form of alcohol that is being used in other countries as an alternative to gasoline to fuel automobiles, Salazar said the state could have control over what will be a key part of the energy sector in years to come (see separate story).

Meanwhile, many Cacique fans remain blissfully unaware of the policy debate.

On the way to catch his flight home from Costa Rica, U.S. tourist Jacob Mendelson stopped in at the Más x Menos supermarket in downtown San José to purchase a bottle of the Costa Rican liquor to take home to his brother.

“Guaro is like a woman,” he said, snatching a bottle off the shelf. “Warm and passionate that night, but painful and confusing in the morning.”


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